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Master investor Warren Buffett is famous for making billions through smart investment choices.
But despite growing up in a privileged family, Buffett is essentially self-made. His fortune came from his investment business. That’s why I think there are lessons I can apply from his approach to my own stock buying choices.
Even if I start with nothing, I think that using this framework and starting to invest money regularly will help me build my wealth.
Focus on your strengths
Buffett has missed many good investment opportunities in his career. That doesn’t bother him – because he only invests in what he understands. So if it is not something that he felt comfortable to evaluate at the beginning, he will not worry about the missed opportunity to invest in a business that is really doing well.
That simple lesson makes sense to me as an investor. Regardless of my own circle of merit, when I buy stocks for my portfolio I think I improve my chances of building wealth by sticking to them. This is because I can better assess what stands out in the marketplace and how sustainable the business model is.
For example, imagine that I can invest JD WetherspoonOr a pub chain in Africa that someone told me is in a vast untapped market. Even if the potential rewards from the business seem great, do I know enough about it to make an informed investment decision? I don’t – unlike spoons.
Wait until it takes
When there is nothing in the bank, the urgent need to build wealth makes people withdraw money as soon as they have some money.
But that’s not what Buffett does. He sits on money – sometimes for years. Not only that, it is worth billions or even tens of billions of dollars!
Why doesn’t Buffett put this to work sooner? He considers the long-term benefit of waiting and investing in A. great The investment opportunity wins the result from the initial investment nice An investment idea that comes his way.
It can be hard to let good opportunities pass you by while waiting for the truly bright ones. But if an investor is serious about building wealth, I think this lesson from Buffett will help.
Looking beyond the phases
One of the benefits of a long career like his is that he’s seen enough short-term fads to learn to ignore them.
The latest craze can help a business thrive for a few years. But what Buffett wants is a long-term money-making machine that looks set to generate profits for decades, even as tastes and fashions change.
That is never guaranteed, which is why it varies from business to business. But what they all have in common is that Buffett thinks they’re positioned to benefit from consumer buying trends — not just for a season or a year, but for decades.